tv Taking Stock With Pimm Fox Bloomberg January 13, 2014 9:00pm-10:01pm EST
>> this is "taking stock" for monday, january 13, 2014. i am julie hyman in for pimm fox. today we focus on dealmaking. billions of dollars of deals involving google, charter communications, time warner cable. we break down the latest on these deals. we head out to the detroit auto show. major automakers unveil their new designs. you will meet an executive who is able to make a bitcoin wallet in seconds. first, to our headlines with olivia sterns. >> charter communications has
offered to buy time warner cable for $132 per share valuing it at $61 billion. it includes $83 in cash per share and about $49 in stock. another big deal after the bell, google has landed nest labs for $3.2 billion. nest will continue to operate under its own brand. those are the top headlines. >> charter has made an offer to buy time warner cable. joining me with details and reactions, we have alex sherman and the chairman of mediamorph, shahid khan.
thank you for joining me. you broke the story, alex. apparently time warner cable has already said they are not going to be satisfied with the price they were given. >> we heard in the story that john malone was telling his associates they don't expect time warner to accept that amount. i was talking to a source familiar with the situation and this person told me that 132.5 is the starting price in the sense that if time warner will not engage, why even bother? >> why isn't time warner cable engaging in this in order to try to negotiate a higher price? >> i think the game has just begun.
as you can tell earlier when comcast and at&t broadband happened, it took five months to actually get a solution. they went from $41 billion to $52 billion. there are two big reasons. time warner cable thinks they can go at it alone. >> can they go at it alone? is that reasonable for management to think that? >> they have a new ceo and they are rebuilding their management team. they have declined over the last several quarters. i think they have the right team in place. >> alex, there are still other potential suitors out there. there is no telling if this deal will go through and at what price it will go through and actually who would even buy time warner cable. >> there is the possibility that charter would team up with comcast or cox.
those companies are monitoring the situation but the question will be if charter will partner with them. or will comcast take over the whole thing. there may be some regulatory issues if that happens. there are combinations that could come together. this is a formal stake on the ground that says that this process is being acknowledged and we are going to move forward. the next steps are to be determined. it's possible that charter could nominate a board of directors so that when time warner cable has its annual meeting in may, charter says nominate these people, they will get a deal done. time warner may resist that. >> i am exhausted just hearing about this back-and-forth. is the bottom line here to get leverage when it comes to negotiating? is that what it is all about? is there a combination that has the best chance at doing that? >> at the end of the day, it is about leverage against the
infrastructure providers and content companies. there will because -- cost savings of the companies come together. if you look at the adelphia deal. it was a three-way deal and they exchange systems across different areas to make them more geographically-friendly. each system inside the cable company is pretty much downloaded. there is precedence in the industry for companies teaming up together. i don't think there will be any regulatory hurdles if the two companies came together. >> i found this really interesting in your story. time warner cable is notorious with terrible customer service. charter says that they are good with customer service and could help them out. is that going to be a compelling
argument? >> historically, they haven't but it has been one of the main things that he has told me time warner cable want to improve. it seems to resonate now even if it hasn't in years past. charter also was notorious for bad customer service but that was before the era of the new ceo. they have improved the customer service. he did the same thing when he was ceo at cablevision so he does have a track record but he will get his chance as ceo to see if he can improve time warner cable if no deal is done. >> when it comes the cable companies, they have an uphill battle. thank you so much. alex sherman broke this story. we appreciate it. as we mentioned, that was not the only deal that was announced after the bell. google is looking to go deeper into the devices market by acquiring nest labs.
i am joined by jon erlichman. jon, this is amazing because $3.2 billion is a pretty big number and i think it is safe to say not many people have heard of nest labs. >> google wants to make sure it is going where all the devices are going. i just got back from the consumer electronics show in las vegas where the big scene was the internet of everything. you got your smartphone, tablet, now your car is connected to the internet. all the stuff in your kitchen is connected to the internet. nest is a company that is taking a technology mindset to some stuff that you would normally find in the home. the guy behind this gets a lot of praise for being one of the designers of the ipod. he went on to discover this thermostat and smoke alarm. they've been working on a lot of other stuff.
when a lot of people look at this business, if they are going to look at the perspective of who would be interested in silicon valley and the next business -- apple comes to mind. maybe google less so but now that you have this deal, maybe apple is working on its own stuff. google has always had this willingness to go out and buy stuff to get access to smart people with a roadmap and use all the resources that google has to do battle in another area and in this case we are talking about the connected home and the connected kitchen. if you think about samsung which had a massive presence at the consumer electronics show, they are already doing a lot of this. when you think of the key competitors to google whether it is apple or samsung, this starts to make sense and follows an interesting deal they did in the
robotics area not too long ago. >> i don't know much about nest labs. have people actually bought the products already? are they in homes? >> this is a private company so there is only so much you could know but a lot of people look at a guy like tony as one of the smart thinkers who thinks about product first. and design -- going back to the drawing board and thinking how we could do this better. making experiences like the thermostat and the smoke alarm a better experience. they do it the same way elon musk has been doing it for tesla. as for paying more than $3 billion for this business, is that what it's worth? it's worth it to google to be able to push further into this area. it makes you wonder how many
different things nest is already putting on its drawing board in terms of this whole big theme of connected home. google wants to be following you wherever the devices are going and we have seen that with this deal and the recent push into robotics, their push into health care. they are just trying to cover all of their bases. it is a company that is willing to go out and spend money to do that. it makes you think back to the purchase of android which ended up being the blueprint to their mobile strategy. nest becomes the blueprint for the strategy in the connected home. julie? >> thank you. really interesting acquisition here. google buys nest labs. we are not done with the deal. we are going to be talking about a major shakeup. we will tell you why a japanese company is paying a big premium for an iconic u.s. brand.
>> there has been a major shakeup in the spirits industry. the japanese giant suntory agreed to buy the iconic u.s. company beam for $16 billion. for more on what the deal means for these two companies and the industry, i am joined by a food and beverage analyst who covers beam. also, the managing director at cappello capital. let me start with you because i said this was a major shakeup. what does this do for the industry? what do we see happen to the flow of brown beverages? >> i am not so sure we will be drinking a lot of japanese scotch anytime soon.
it enhances the distribution footprint. let's face it, the consolidation in the spirits business and alcoholic beverages have generally has been moving along at pace and this is the next step. >> i am curious about the price on this because by all accounts this premium that they paid is relatively high when you look at other beverage companies. what are they looking to do here? what do they really get out of this deal? >> strategically it makes sense. regardless of how beam does, they will take it to the asian markets. they can go out to the big spirit companies out there. they are able to take advantage of a strong yen to get this
done. this deal could be genius by them if the currency markets continue on the way they are. and by borrowing in yen and making money in u.s. dollars, that currency relationship could be huge for them and profitability-wise it could be off the charts. >> are there any cultural challenges in this kind of deal? >> there will be some issues. >> tim, go ahead. >> there will be some issues but the business will still be run out of illinois and i feel like the players would not change very much in the u.s. this is about enhancing the international distribution. >> i was going to say, i don't see this as risky.
obviously with any cross-border deals, you have integration risk, currency fluctuation among other things. we are seeing a lot more risk being applied to the emanating markets. >> do you think we see more consolidation in beverages? >> it is possible. with this deal you are creating the world's third-largest beverage company. you may have more consolidation but i think after this deal, for the time being, you are going to be where you are at today.
>> what do you think, tim? >> i wouldn't be surprised to see more deals. one of the things we think that constellation brands which is a wine company. they may think about selling their spirits business if the multiples we are talking about are 20 times this. >> who would buy something like that? >> it could be any number of players because it is a small portfolio. there has been a speculation about the relationship between brown-forman and bacardi. both are family-controlled companies so it will not happen if the families don't want it to happen. >> thank you so much and cheers. we are talking about this deal. tim and gene, thank you. coming up, the largest health- care investment symposium in the industry kicks off today in san francisco. i will talk to a key player in the industry. that is next on "taking stock."
shows 2.2 million people signed up for the affordable care act at the end of last year. that was a sevenfold jump in federal sign-ups last month and 79% of those who enrolled also requested financial assistance. 70% of the sign-ups were over the age of 34 and a third were 55 years and older. what does this mean for the health insurance industry? florida's plan has been getting a lot of attention. we are joined by mike in san francisco. is the hot topic there about the
affordable care act and the repercussions? >> it is a very positive industry and meeting. very upbeat. the affordable care act is the main topic. >> you guys have been one of the early winners because of the short medical coverage you offer. talk to me about what it is and how it works. >> short-term major medical has the same or similar coverages as the exchange program but it is 30% less. the product can be purchased online. the consumer can tailor-make their product to their budget so if they want to add preventative care, etc., they can tailor-make a program and be off and running. >> what is the difference between this and signing up with an exchange plan?
is it shorter-term? what are the main differences? >> our products are available monthly depending on the state you're in. you can go to any doctor, hospital, you are not restricted to a certain network and you only pay $50 to visit a doctor. it is not for everyone. it does not cover pre-existing conditions, maternity. for many americans it makes a lot of sense. >> it is for people who are healthy going into signing up for the plan. >> we accept 95% of all the folks who enroll but there are 5% of the population who have diseases and we do not cover pre-existing conditions. >> some of the plans that people sign up for generally, if they don't meet all of the requirements than they have to pay penalties.
does that apply to some of the plans you all have? >> in many cases it does, but even with the penalty, it is less than half the cost. for a family of four in texas, our program is $3000. it is $12,000 with the affordable care act. >> when you say people can sign up for it for six months or 12 months, is there a limit as to how long someone can be covered under your coverage? >> if they purchase online, they pay by credit card, they can take it monthly. they simply stop payment when they don't need coverage. >> i am curious about this potential customer base because it seems like these plans are pretty specific and they might appeal to a limited number of people with very specific needs. >> it is a major part of the population. one of the things we provide is we have over 10,000 guidance counselors that will take the consumers -- show them the plans available on exchange, off
exchange. it will compare benefits and rates. we will take the progressive model, we will make the recommendations to the consumer. >> your company just became public recently. was that pretty much pinned to aca? what kind of coverage does the company provide before aca was enacted and what kind of appeal did it have? >> short-term medical has been around for over 25 years. we spend the most time on organic growth. what happened when the affordable care act was put in place a couple of weeks ago is that the marketplace is going to rise by as much as 300%, primarily in the small groups.
>> this is "taking stock." i am julie hyman. let's go to olivia sterns for our headlines. >> google is acquiring nest labs for $3.2 billion. nest will continue to operate under its own brand. the deal is expected to close in the next few months. charter communications has offered to buy time warner cable that would value the cable provider at more than $61 billion. the proposal would include $83 in cash per share and $49 in charter stock. according to the ceo, no serious
response has been given. china's top food company trailed estimates. it faces a rising competition from local dining chains. it only rose 2%. >> the north american auto show is underway in detroit. the top automakers will unveil their new products. matt miller is at the show. he is standing by with one of subaru's top executives. >> i know you are a fan of subaru. i am standing here with the president of subaru america. the sti has been one of the most vaunted cars at the shows and it has not been released yet. people have been writing about it for days and weeks.
what can you tell us? >> we are very excited to be back here in detroit because 10 years ago we launched the 2004 model. >> now it is totally separate. >> it is its own car. where else are you going to get sti performance? the price point and horsepower and all the utility it provides it is the complete package. >> it is a turbo-charged rally car. you have had the same kind of thing with a couple of other cars. one in orange. the kids just love it. >> crosstrek was a home run for
us. we thought we would sell 1500 a month and instead we are doing 5000 a month. it has attracted a much younger demographic to our customer base that we had before. >> people think of subaru as a niche brand. you actually outsold volkswagon in the u.s. that is the people's car and you outsold it. >> we sold many vehicles. we are very focused on who our customer is. we know the type of demographic that tends to purchase a subaru. we go after those types of customers. >> investors have taken note. i wanted to mention, we at bloomberg have been watching fuji heavy industries, subura's parent company. subaru is the main business. i think the stock has tripled this year. it is up 400%. >> analysts are realizing the value. when you look at the product
line and you look at the fact we don't sell the cars with a lot of incentives. when you look at the fixed cost that it takes to produce the cars, it is a great profit vehicle and the exchange rate is working in our favor. >> what are the marketing costs? the only thing i could think of is the puppy super bowl that you do. >> the puppy bowl? we advertise on television and we do a lot of print and radio like other manufacturers. we try to stay away from customer backed incentives. we believe our products have value and want to stress the value of the products. >> you are doing the kickbacks? >> we try to stay away from that. >> you do emphasize -- i am a huge dog lover. you actually tested dog safety harnesses in some of your cars. >> we have worked with the aspca to develop a dog harness
specifically for vehicles. you can purchase the dog harness. it keeps the dog safe and restrained so they don't become a flying object if the vehicle were to get hit. >> it sounds like a big selling point. one of the problems you have had is that you can't keep enough cars on the lot. does it anger a customer when they come and they want a new sti and can't find one? >> people are willing to wait for the vehicle because they will get the exact vehicle they want. it started around the earthquake, tsunami time back in march of 2011. we did not think people would wait. we have learned that they are willing to wait for a certain period of time. >> i will bring bring back a crosstrek for julie. >> we will set her up.
>> i'm ready. i don't need a dog harness though. thank you. next, we will be right back in detroit. matt will be joined by the man who usually sits right here -- pimm fox. we will also be talking baseball. the saga of a-rod continues as the new york yankees slugger is suing mlb now. we will have the latest on that. ♪ >> this is "taking stock."
150, which is ford's biggest seller -- it is trimming down because of aluminum. >> everybody talks about how their car weighs less. the bmws are using carbon fiber in everything from their entry- level electric car up through the m-series. audi -- they have been using aluminum for over 20 years. >> the f-150 is different from an audi. it has to take a little more of a rugged hit because if you're going to have any kind of dent with an aluminum frame, what are you going to do? >> that is the problem. it should be stronger and more resistant to dents but if you get a dent in the middle of new
mexico, the local mechanic has no idea how to fix that and it is expensive. >> g.m. comes out and gets car and truck of the year. >> it was a no-brainer. if you look back at 2013 from any point in the future, it was all about the corvette. they have their new corvette out. >> it was beautiful and yellow. i spoke to peter brock, the creator of the design of the stingray. >> the split window design which was only made for one year. the truck of the year was the silverado last year. it is basically the corvette of this year. it is the most important unveiling and piece of news we are going to get at any auto show. >> the lightning of the f-150. >> and the chrysler 200 was unveiled today and it looked great.
it looks like an alfa romeo. i lust after them and especially the 4c. it will be a while until it comes out. not until 2015. i was telling you before we came on -- it is not the new cars that have me most excited, it is the cars i fell in love with in the past that have new features. >> the shaker? isn't there a shaker on the challenger? >> the shaker on the hood of the dodge challenger. you can get the same ones from an old mustang. >> will you be putting red flames on the back of the car? >> exactly. i will bring that back for me and you get the crosstrek. >> i have a new title for you -- auto nerd.
>> enthusiast would be better. >> that was our auto enthusiasts/nerds/gurus. bitcoin -- according to my next guest, it is like having a bank account only it takes a minute to get started and more secure than traditional banking. the first online bitcoin website to reach one million users deals exclusively with bitcoins. we did 12 days of bitcoin and had some money stolen from a paper wallet that was given to adam johnson. walk me through how this works. how the wallet works.
>> this is two things. it is the world's most popular bitcoin website. it is a place you can go to study currency statistics. think like a google for the bitcoin world but also a wallet service. paper wallet is one way of storing your bitcoin but when you show someone a private key, they can spend that money. we are not going to show any private keys but we will go through the process of setting up a wallet which is a free service. since last week when we announced breaking news that one million wallets were created, we have seen another 50,000 in the last seven days. we have seen fast growth. >> walk us through it and we will talk some more about it and how it works. >> on the homepage of our site, you will see transactions moving across the network in real time. right now, $13,000. when you are ready to create a wallet, click the wallet link at
the upper right-hand corner and we will start now for free. you don't need an e-mail address but i will put one in here. create a quick password. >> nobody look at his password here. we don't want more bitcoins stolen. then you have to put in the code as well. >> one really important thing about this service is that we don't have access to any of your passwords. what is about to happen is they go in and are encrypted in the browser itself. >> how does the transaction actually happen? you deposit money from your bank and that goes directly into the wallet? >> it is true you can create a bank account with bitcoin. when you want to buy bitcoins, you can go to the exchange or go directly to a company.
there is ways of buying them locally too but i will fund this wallet with my cell phone easily to make a transaction. my password is not right here. i will pull one up here. once i find a wallet, it is easy to make a transaction. i will create one here. >> you can do it from your phone and from a bank account. then you actually buy various things. you use bitcoin for an increasing number of different kinds of transactions. >> once you have created a wallet, you can spend your bitcoins anywhere in the world. i earn my income on bitcoin. i travel with it and rent apartments all over the world. >> do you only buy things in bitcoin or do you convert your
bitcoins into regular dollars? there are some places that probably only take cash or other forms of non-bitcoin currency. >> i can go 99% of my life using bitcoin for transactions. for a parking ticket, i probably have to take out my credit card. we have created a wallet and you want to make sure you get your password correctly. i will send some bitcoins over to this wallet. you take a picture of the key and it is really easy to send it. this happens basically anywhere in the world all the time. >> here is one of my questions when you are signing up which is so easy and great on the one hand, but on the other hand, when a bank -- you deposit your money in a bank, there is a guarantee you actually have the
money. there is a credit check in some cases to sign up for various kinds of things. is there concern here, is there any way to spend money you don't have? are there any safeguards? >> what i am going to talk about is yes, there are. there are different types of safeguards. this is really a wallet service that allows you to secure your bitcoins. when you are running an exchange, you are going to need to be compliant with some of those things. you can take it anywhere you go when you have a wallet. we funded the wallet with $20,000. anyone who has this little picture could send me more money. >> this turns up in dollars and not in bitcoins. >> you can switch it either way and we support people's transition process to study their value anyway they want. it is written in a dozen different languages.
guests. evan, is this suit going to hold? what are the prospects? >> it will be difficult for alex rodriguez to win this. in federal court, it is very difficult to overturn an arbitration ruling. >> at the same time, a-rod has made this out to be a witchhunt in the part of bud selig. is there a vendetta at work or is he seeing things that is not there? >> i think he has a history of saying things. he has always been a lightning rod ever since he signed that contract with the rangers. once he earned that contract, he has had that bull's-eye on his back and he feels that unlike the other players who were accused.
they all pleaded guilty. he chose to fight. originally it was 211 games. the odds are very strong he will probably never play major league baseball again. >> one of the questions we had with the suspension is that it seemed arbitrary. there was nothing in the cba that said mlb could do that. i was surprised to see the result being a 162-game suspension. where do you think that came from? >> i thought 150 games would be what we see. 211 we could not quantify. where did it come from? we are looking at a season-long suspension no matter what and as we have seen over the past day and a half with everything that is coming out, there was enough evidence to support a season- long suspension and that is what he got.
>> one of the most outspoken -- the witness in the situation is a guy named anthony bosch. there have been some questions about his credibility. do you think he is credible when it comes down to it? >> the question is what benefit does he have about lying at this point? is he making up all the stories? >> attention? >> it could be. it could also be -- i assume all his cooperation is helping him in the eyes of the federal government as well as mlb in terms of punishment. there is that thought in the back of your mind that maybe he is being forthcoming because he stands to benefit. >> this is one thing that a-rod has hammered a lot. anthony bosch is someone who went to the press. baseball essentially sued bosch and then dropped that lawsuit in turn for his cooperation. there is question about how legitimate his testimony is.
>> it is all about confirmation. that is what we are forgetting about. evidence has been purchased by mlb. they needed anthony bosch to confirm the evidence they had purchased. he did that whether we want to agree with his character or not. he did exactly what mlb needed him to do. >> the way a-rod has taken this we are getting away from if he is guilty or not. the argument now is if the entire arbitration process was fair. >> do you think he will take the field again? >> probably not. i think it will be a monumental fight for him legally in the next weeks and months ahead. >> thank you so much. this has been "taking stock." pimm will be back tomorrow. ♪